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The SEC alleges that Arnold McClellan and his wife Annabel, who live in San Francisco, provided advance notice of at least seven confidential acquisitions planned by Deloitte's clients to Annabel's sister and brother-in-law in London. After receiving the illegal tips, the brother-in-law took financial positions in U.S. companies that were targets of acquisitions by Arnold McClellan's clients. His subsequent trades were closely timed with telephone calls between Annabel McClellan and her sister, and with in-person visits with the McClellans. Their insider trading reaped illegal profits of approximately $3 million in U.S. dollars, half of which was to be funneled back to Annabel McClellan.

The UK Financial Services Authority (FSA) has announced charges against the two relatives — James and Miranda Sanders of London. The FSA also charged colleagues of James Sanders whom he tipped with the nonpublic information in the course of his work at his London-based derivatives firm. Sanders's tippees and clients made approximately $20 million in U.S. dollars by trading on the inside information.

"The McClellans might have thought that they could conceal their illegal scheme by having close relatives make illegal trades offshore. They were wrong," said Robert Khuzami, Director of the SEC's Division of Enforcement. "In this day and age, whether it's across oceans or across markets, the SEC and its domestic and foreign law enforcement partners are committed to identifying and prosecuting illegal insider trading."

Marc J. Fagel, Director of the SEC's San Francisco Regional Office, added, "Deloitte and its clients entrusted Arnold McClellan with highly confidential information. Along with his wife, he abused that trust and used high-placed access to corporate secrets for the couple's own benefit and their family's enrichment."

According to the SEC's complaint, Arnold McClellan had access to highly confidential information while serving as the head of one of Deloitte's regional mergers and acquisitions teams. He provided tax and other advice to Deloitte's clients that were considering corporate acquisitions.

The SEC alleges that between 2006 and 2008, James Sanders used the non-public information obtained from the McClellans to purchase derivative financial instruments known as "spread bets" that are pegged to the price of the underlying U.S. stock. The trading started modestly, with James Sanders buying the equivalent of 1,000 shares of stock in a company that Arnold McClellan's client was attempting to acquire. Subsequent deals netted significant trading profits, and eventually James Sanders was taking large positions and passing along information about Arnold McClellan's deals to colleagues and clients at his trading firm as well as to his father.

Among the confidential impending transactions allegedly revealed by McClellan:

Kronos Inc., a Massachusetts-based data collection and payroll software company acquired by a private equity firm in 2007.

aQuantive Inc., a Seattle-based digital advertising and marketing company acquired by Microsoft in 2007.

Getty Images Inc., a Seattle-based licenser of photographs and other visual content acquired by a private equity firm in 2008.

The SEC's complaint alleges the following chronology involving insider trading around the Kronos transaction:

The SEC's case was investigated by Victor W. Hong, Monique C. Winkler, Alice L. Jensen, and Jina L. Choi of the San Francisco Regional Office. The Commission would like to thank the UK Financial Services Authority, the U.S. Attorney's Office for the Northern District of California, and the Federal Bureau of Investigation for their assistance in this matter.

On October 25, 2011, the Court approved a settlement of the Commission's claims against Annabel McClellan. Without admitting or denying the allegations, Ms. McClellan agreed to pay a $1 million civil penalty and consented to the entry of a final judgment that enjoined her from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In a related action, the Commission requested the dismissal of the insider trading claims against Arnold McClellan, which the Court subsequently granted with prejudice. For additional information, see Litigation Release No. 22139 (Oct. 25, 2011).